Vodafone accused of exploiting rival

Scandal-hit US telecoms group WorldCom says British firm abused its power

WorldCom, the US telecoms company exposed for fraudulent accounting, has accused Vodafone of "engaging in exploitative practices".

The allegation is contained in an eight-page letter to the telecoms regulator Oftel, in which it claims that the British mobile phone company has used its power to squeeze rival telecoms operators.

The complaint centres on a contract between Vodafone and WorldCom, which was "signed under protest" last December. In it, Vodafone agreed to connect calls made from WorldCom's telephone network to its mobile customers.

But the contract also included clauses requiring WorldCom to provide bank guarantees and advance cash payments to Vodafone. The mobile operator inserted the clauses as it was concerned about doing business with financially shaky companies.

WorldCom, headed by the former head of Compaq, Michael Capellas, is still in US Chapter 11 bankruptcy protection after it inflated earnings by $11bn (£6.6bn). It is expected to emerge from Chapter 11 before the end of the year after agreeing to pay $500m to settle civil charges.

Despite its own controversial past, WorldCom believes Vodafone has overstepped the mark. "Vodafone has both the incentive and the opportunity to abuse the application," it says in its letter. "We submit that Vodafone is engaging in exploitative practices to the direct detriment of its customers."

Vodafone and WorldCom both refused to comment.

WorldCom, currently rebranding itself as MCI, claims Vodafone's contract places "substantial costs" on other operators, "while at the same time improving Vodafone's cash flow and minimising (if not eliminating) its bad debt exposure".

The attack on Vodafone is being masterminded by Andrew MacLeod, the new European head of WorldCom and former chief operating officer of Cable & Wireless's troubled Global operation.

NTL, which exited Chapter 11 in January, is also worried about Vodafone's new contract. In a separate letter to Oftel, the cable operator said the contract sets a "very damaging precedent". NTL argues that if BT followed suit, it would have a "catastrophic" effect on rival telecoms companies, potentially forcing some out of the market. "We suspect that BT will attempt to revise its own policy," says NTL.

The letters, sent earlier this month, are in response to a draft ruling by Oftel. It broadly supported Vodafone's new contract, but said the company should take into account fac-tors such as payment history when carrying out credit assessments on other operators.

Oftel is due to make its final ruling next month.